Micro Chapter 1, 2, 3, 4

the value of the best opportunity that must be sacrificed in order to take the action.

The opportunity cost of an action is:

best alternative foregone by building the park.

The opportunity cost to a city for using local tax revenues to construct a new park is the:

to produce more of any one thing, assuming full employment, the economy must produce less of something else.

The production possibilities curve demonstrates the basic economic principle that:

b unlimited wants

The production possibilities curve illustrates all of the following concepts except :

Can be produced with the available technology

The production possibilities curve shows different combinations of goods that:

d the law of increasing opportunity cost

The production possibility curve is bowed outward from the origin because of:

C outward shift

Using a production possibilities curve, a technological advance that increases the amount of output for the same amount of inputs would be illustrated as a(n):

Nothing

Voluntary recycling is available in many parts of the country. If citizens of these areas have collected recyclable material at home, they can bring it to a recycling center. These materials reduce landfill space, reduce the need for virgin material extraction, and provide an inexpensive input in many production processes. The information in this question suggests what about areas without voluntary recycling?

downward -sloping

When an inverse relationship is graphed, the resulting line or curve is:

(c) Change in product price

Which of the following can bring about a change in the quantity demanded?

b

Which of the following changes could cause the computer market to change as shown in Exhibit 4-4?

C A

Which of the following factors of production is defined as those individuals in our society who deal with uncertainty?

The economy's annual growth rate.

Which of the following is a macroeconomics topic?

d

Which of the following is an example of a negative externality?

a. People's willingness to buy goods and services at given prices.

Which of the following is closest to the definition of demand?

Unemployment in the nation.

Which of the following is included in the study of macroeconomics?

b. a decrease in the price of tires

Which of the following is least likely to increase the demand for new tires?

b

Which of the following is not a characteristic of a public good?

c. An excess supply of rentals at the controlled price.

Which of the following is not a common effect of imposing a rent control?

all of these answers are correct

Which of the following is true of the production possibilities curve?

A horizontal or vertical line

Which of the following is used to illustrate an independent relationship between two variables?

X to Y

Which of the following moves from one point to another in Exhibit 2-9 would represent an increase in economic efficiency?

The price of a concert and the number of tickets people purchase

Which of the following pairs is the most likely to exhibit an inverse relationship?

"There is no such thing as a free lunch."

Which of the following sayings best reflects the concept of opportunity cost?

All of these

Which of the following would decrease the price of packaged hot dogs?

All of these

Each year around Valentine's Day, we would expect:

answer questions and analyze issues

Economists use models to:

False

The law of supply indicates that an increase in price will cause an increase in supply which is reflected graphically as a rightward shift of the supply curve.

Observation is necessary in order to determine if a proposition is true or false.

A Posteriori propositions are those in which

c. Demand increases.

A baby boom will have what immediate effect on the disposable diaper market?

True

A black market may arise when government imposes a price ceiling.

e. the minimum wage law.

A good example of a price floor is:

a price floor

A legally mandated minimum wage is an example of:

Her marginal value of food has fallen to zero.

A local restaurant offers an "all you can eat" Sunday brunch for $12. Susan eats four servings, but leaves half of a fifth helping uneaten. Why?

a. is the sum of the demand curves of all the individuals in a particular market.

A market demand curve:

c. quantity demanded.

A movement along a demand curve is called a change in:

False

A nation can accelerate economic growth by increasing its production of consumer goods.

unattainable

A point outside the production possibilities curve represents a combination of goods that is:

is the highest price that the law will allow to be charged in the market.

A price ceiling

True

A price ceiling set below the equilibrium price creates a shortage.

D A

A priori propositions are those in which . . .

(b) supply over demand

A surplus means

the means of formal logic are necessary, but not sufficient in order to determine if a proposition is true or false.

A synthetic proposition in one in which. . .

(b) rightward shift in the supply curve for DVDs.

A technological breakthrough lowers the cost of manufacturing DVDs. As a result, the market changes to a new equilibrium because of a(n):

True

According to Lord Lionel Robbins, Economics is the science that studies human behavior as a relationship between scarce means and human ends.

True

According to the law of demand, if the price of a good increases, other things being equal, the quantity demanded will decrease

a. When nonprice determinants, like income and the number of buyers, are unchanged.

According to the law of demand, when will higher corn prices reduce the quantity demanded of corn?

C

After a hurricane in Florida knocked out the regional water supply for several days, the demand for bottled water increased sharply. In a market economy, how will this increase in demand affect the equilibrium price and quantity of bottled water?

c . we will have to give up the production of other goods that could have been produced with these resources.

After the terrorist attacks on September 11, 2001, the United States began devoting substantial resources toward the War on Terrorism, homeland security, and relief efforts. As long as our resources were being used efficiently, the production possibilities curve would suggest that:

effiicient

All points on the production possibilities curve are:

Capital

An economics textbook is an example of:

Identify the problem, develop a model based on simplifying assumptions and test the model to formulate a conclusion.

An economist at the University of Alaska at Anchorage has been asked to explain why the price of Alaskan crude oil has fallen recently. In order to develop a model, the professor should take which steps?

All of these

An efficient economy:

False

An equilibrium price is unaffected by nonprice factors.

a. unintended benefits or costs imposed on third parties as a result of economic activity.

An externality is:

True

An increase in the cost of chicken feed will reduce the supply of eggs.

a direct relationship.

An upward-sloping line or curve is used to illustrate:

the means of formal logic are sufficient in order to determine if a proposition is true or false

Analytic propositions are those . . .

b Maximum

Any point on the production possibilities curve illustrates:

. less than the maximum rate of output for this economy.

As shown in Exhibit 2-8, a total output of 14 units of consumer goods and 1 unit of capital goods is:

True

Assume a ceiling price is set above the equilibrium price. The final result is the equilibrium price.

False

Assume a price floor is set above the equilibrium price. The result is a shortage.

False

Assuming an economy is already experiencing full employment, then it must produce more consumer goods and fewer capital goods if it wishes to experience greater rates of economic growth over time.

True

Assuming supply is held constant, an increase in demand for a product will cause an increase in the equilibrium price and the amount bought and sold.

e

At a price of $5, Sam buys 10 units of a product; when the price increases to $6, Sam buys 8 units. Martha says Sam's demand has decreased. Is Martha correct?

a. Technological improvements that reduced the cost of supplying cellular phone service

Between 1994 and 2004, the monthly charge for cellular phone service decreased from $120 per month to $30 per month. At the same time, the number of subscribers increased from less than 10 million to more than 75 million. Which of the following provides the best explanation for these changes?

The Batman T-shirt.

Bill has $10 to spend on a Superman, Batman, or an X-Men T-shirt. Bill buys the Superman T-shirt and the Batman shirt was a close second choice. What is the opportunity cost?

c. quantity demanded.

Ceteris paribus, a change in the price of a good always results in a change in:

c

Consider the market for grapes. An increase in the wage paid to grape pickers will cause the:

Microeconomics

Determining the price of compact discs is a concern of:

True

Each and every point along a production possibilities curve represents an efficient output option for an economy.

Excess supply 400

Exhibit 3-8 presents supply and demand data for the radio market. If the price of radios was currently $70, there would be an ____ of ____ radios in this market.

a. there will be excess quantity supplied.

Exhibit 4-1 shows that at a price of $3.00,

a. $1.00, 200.

Exhibit 4-9 the equilibrium price and quantity in the market are:

experience an increase in its resources and/or an improvement in its technology.

For the economy shown in Exhibit 2-7 to operate at point C, it must:

Some car production must be forgone in order to produce more grain in the same period

For the economy shown in Exhibit 2-7, which of the following is true when the economy is at point

False

Higher milk prices reduce the demand for milk.

d. Demand would decrease, leading to a reduction in price and a reduction in quantity sold.

How would a decrease in consumer income affect the market for new automobiles?

d

If a government-imposed price floor legally sets the price of milk above market equilibrium, which of the following will most likely happen?

(c)

If a shortage exists in a market then

True

If a vacation in Paris is a normal good, other things being equal, an increase in consumer income will increase the demand for travel to Paris.

its resources are not being used efficiently.

If an economy is operating at a point inside the production possibilities curve,

a. A surplus of unskilled labor (unemployment).

If an increase in the government-imposed minimum wage pushes the price (wage) of unskilled labor above market equilibrium, which of the following will most likely occur in the unskilled labor market?

the supply of doctors increase

If more people enter medical school, we can expect:

True

If movies are an inferior good, movie attendance will rise when consumer incomes fall.

True

If people buy more of a generic brand when consumer income falls, it is an inferior good.

True

If pork and beans is an inferior good, other things being equal, an increase in consumer income will decrease the demand for pork and beans.

False

If some resources were used inefficiently, the economy would operate outside its production possibilities curve

False

If the demand curve increases while the supply curve remains unchanged, the equilibrium price would decrease.

c. Price would decrease, and quantity would decrease.

If the demand for a good decreased, what would be the effect on the equilibrium price and quantity?

there will be a shortage of bread

If the equilibrium price of bread is $2 and the government imposes a $1.50 price ceiling on the price of bread, then

d

If the government imposes a price ceiling below the market equilibrium price, which of the following will result?

(C) Price will increase and quantity will decrease

If the supply of a good decreased, what would be the effect on the equilibrium price and quantity?

Fail

If there is a surplus in the oil market, then the price of oil will:

(c) Encourage farmers to produce less milk.

If you were a government official that wanted to raise the equilibrium price of milk, which of the following actions would you take?

b The production possibilities curves for these countries would have shifted inward.

In Europe during the 14th century, the Black Plague killed 24 million people or close to 37 percent of the population. How would this affect the production possibilities curves for the countries of Europe at that time?

b. 3 units of consumption goods

In Exhibit 2-1, according to the information, the opportunity cost of producing 3 units of capital is:

Would be zero

In Exhibit 2-16, to move from U to B, the opportunity cost:

At price 0.70 there is an excess supply of milk.

In Exhibit 3-6, which of the following is true about the milk market?

d

In Exhibit 3-7, if price happened to currently be $25 in this market, a ____ would result, causing a(n) ____ in price.

b

Initially the market shown in Exhibit 4-5 is in equilibrium at P 2, Q 2 (E 2). Changes in market conditions result in a new equilibrium at P 2, Q 4 (E 4). This change is stated as a(n)

True

It's difficult for a private firm to provide a public good because of free riders.

10 points she lost on her exam

Mikki decides to work five hours the night before her economics exam. She earns an extra $75, but her exam score is 10 points lower than it would have been had she stayed home and studied. Her opportunity cost is the:

. that labor is not equally productive or homogeneous (nonhomogeneous).

Movement along this production possibilities curve shown in Exhibit 2-9 indicates:

A resources and technology

Of factors which affect any economy's production potential, the best two listed below are:

b. upward movement along the demand curve for orange juice.

Other things being equal, the effects of an increase in the price of orange juice would best be represented by a(n):

free riders

People who enjoy the benefits of a public good without paying for them are called:

False

Price floors typically improve market efficiency.

c and e

Sometimes the government deals with externalities by creating laws to regulate behavior instead of using taxes to correct the market failure. So, requiring auto manufacturers to install a device called a catalytic converter which removes some toxins from exhaust may be preferable to a gas tax that reduces driving levels. This route is often preferred because:

AD

Straight line AB in Exhibit 1A-1 shows that:

False

Suppose A and B are complementary goods. Other things being equal, the demand curve for A will shift to the right when the price of B goes up.

False

Suppose A and B are substitute goods. Other things being equal, the demand curve for A will shift to the right when the price of B goes down.

2

Suppose an economy is faced with the production possibilities table shown in Exhibit 2-10. The first unit of capital goods will cost the economy ____ units of consumption goods.

c

Suppose the government imposes a per unit tax on an item whose production process creates a negative externality. Suppose the tax is exactly the value of the marginal externality cost. If the government now uses the tax revenue to clean up pollution from this process, the market will:

microeconomics concentrates on the behavior of individual consumers and firms while macroeconomics focuses on the performance of the entire economy.

The basic difference between macroeconomics and microeconomics is

b. quantity demanded is equal to quantity supplied.

The equilibrium price is best defined as the price at which:

c. a market demand curve.

The horizontal summation of individual demand curves gives:

b. buyers buy less of it.

The law of demand indicates that as the price of a good increases:

d. downward-sloping.

The law of demand is illustrated by a demand curve that is:

b. inverse relationship between the price of a good and the willingness of consumers to buy it.

The law of demand refers to the:

greater the quantity demanded per period of time

The law of demand says that the lower the price charged for a good, ceteris paribus, the

increases as more of the good is produced.

The law of increasing costs indicates that the opportunity cost of producing a good:

False

The supply curve for chicken will shift to the right, if production costs increase.

macroeconomist

The television network newscaster reports that the national inflation rate the past year equaled 4 percent. This report would be of particular interest to a ____.

a. the price is set below the equilibrium level.

Tickets to the Indiana-Purdue basketball game are usually sold out in advance of game day. This suggests:

c. .50

While waiting in line to buy two tacos at 80 cents each and a medium drink for 90 cents, Jordan notices that the restaurant has a value meal containing three tacos and a medium drink all for $3. For Jordan, the marginal cost of the third taco would be:

It is unattainable

n Exhibit 2-15, what can we conclude about point Q?

d Workers are not equally suited to all tasks

s production of a good increases, opportunity costs rise because: